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It takes a lot of guts to be an entrepreneur. You have a great idea and think it’ll make you money. You put your life savings on the line, enter courageously into a cutthroat world that is just waiting to see you fail. And I discovered all that just by watching Shark Tank. So when Mr Tharman’s Budget speech talks about “sharpening support” for business? I’m a little concerned. But I’m not an SME owner. Here are the changes that were announced. You tell me if my concern is unfounded.
1. Wage Credit Scheme
The Wage Credit Scheme is supposed to encourage employers to increase wages for Singaporeans. In the past, if employees earned $4000 or less a month, 40% of the wage increases would be co-funded by the government. Moving forward, that amount will now only be 20%.
What does this mean for you as an employer?
We don’t want to bore you with the numbers, but basically you can’t be randomly inflating your employees wages anymore.
Say, at the start of every year, you raise your employees’ wages by $100. Before 2016, the government would co-fund 40% of your raise. That’s $40 a month or $480 a year. You would only be paying $60 a month or $720 a year.
For example, say in 2013, your employee’s salary was $2000.
In 2014, you raised it by $100 to $2100. You pay $60 more a month (compared to 2013), the government pays $40 a month, saving you $720 for that year.
In 2015, you raise salaries by another $100 to $2200. You’re now paying $120 more a month (compared to 2013), the government is paying $80 a month, saving you $1440 this year.
However, come 2016, the government will only subsidise 20% of that wage increase.
That means, in 2016, when you raise your employees’ wages by $100 to $2300, the government will only be subsidising you with $40 a month, or $720 for that year. That means you’re now paying $260 more a month (compared to 2013).
So in other words, the cost for raising an employee’s wage by $100 each year has gone from $60 in Year 1, to $120 in Year 2, to $260 in Year 3.
What will happen once the Wage Credit Scheme is phased out altogether?
True, the Wage Credit Scheme was originally supposed to end in 2015, so this extension IS a bonus. But even with the smaller subsidies trickling down next year, I expect you, as an employer, will find it harder to give your employees generous wage increases.
You need to be honest with yourself and your employees if their current salary is sustainable without the government’s help. If it is not, then it’s probably time to have a meeting with them this year (while the 40% Wage Credit Scheme is still in effect) and tell them that it might not be a good idea to buy a new car at this time, no matter how “low” the COE has gotten.
2. Corporate Income Tax Rebate...
http://blog.moneysmart.sg/business/budget-2015-dear-sme-owners-are-you-getting-screwed/
1. Wage Credit Scheme
The Wage Credit Scheme is supposed to encourage employers to increase wages for Singaporeans. In the past, if employees earned $4000 or less a month, 40% of the wage increases would be co-funded by the government. Moving forward, that amount will now only be 20%.
What does this mean for you as an employer?
We don’t want to bore you with the numbers, but basically you can’t be randomly inflating your employees wages anymore.
Say, at the start of every year, you raise your employees’ wages by $100. Before 2016, the government would co-fund 40% of your raise. That’s $40 a month or $480 a year. You would only be paying $60 a month or $720 a year.
For example, say in 2013, your employee’s salary was $2000.
In 2014, you raised it by $100 to $2100. You pay $60 more a month (compared to 2013), the government pays $40 a month, saving you $720 for that year.
In 2015, you raise salaries by another $100 to $2200. You’re now paying $120 more a month (compared to 2013), the government is paying $80 a month, saving you $1440 this year.
However, come 2016, the government will only subsidise 20% of that wage increase.
That means, in 2016, when you raise your employees’ wages by $100 to $2300, the government will only be subsidising you with $40 a month, or $720 for that year. That means you’re now paying $260 more a month (compared to 2013).
So in other words, the cost for raising an employee’s wage by $100 each year has gone from $60 in Year 1, to $120 in Year 2, to $260 in Year 3.
What will happen once the Wage Credit Scheme is phased out altogether?
True, the Wage Credit Scheme was originally supposed to end in 2015, so this extension IS a bonus. But even with the smaller subsidies trickling down next year, I expect you, as an employer, will find it harder to give your employees generous wage increases.
You need to be honest with yourself and your employees if their current salary is sustainable without the government’s help. If it is not, then it’s probably time to have a meeting with them this year (while the 40% Wage Credit Scheme is still in effect) and tell them that it might not be a good idea to buy a new car at this time, no matter how “low” the COE has gotten.
2. Corporate Income Tax Rebate...
http://blog.moneysmart.sg/business/budget-2015-dear-sme-owners-are-you-getting-screwed/
